Why do machines take bankers’ hours? So bankers can make more money.

Planet Money asks why it takes 5-7 business days to send money – which is a purely digital transaction – while we can now have diapers, books, and even appliances delivered to our door within 24 hours.

They conclude that the ACH money transfer system is “so slow because it was designed in the 1970’s.”

But the more interesting question is why hasn’t it been updated?  Are the financial institutions benefiting from this glacial system of ACH money transfers?  

At another point in the story, Alex Blumberg admits that he has paid lots of money in overdraft fees, due to transfers that didn’t go through as fast as he expected them to.

And the banks won’t answer any questions about ACH.

And then the other shoe drops. They reveal that the banks have voted down potential upgrades out of fear that a faster ACH system will cannibalize other forms of transfers, like wires, that are fast but expensive. So this is good old-fashioned collusion.


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“You’re gonna pay for it down the line.”

Frontline takes on the NFL over concussions.

Knowing what we do about the brain, it’s hard to imagine that repeated traumatic impacts to the head wouldn’t have some negative effect over time.  And it’s obviously not hard to imagine that the NFL would go to extreme lengths to avoid admitting this, given the money involved.

But the rigor of the reporting isn’t quite what you’d expect from Frontline.  For one thing, they don’t even bring up the problems with correlation.  In other words, just because NFL players suffer from chronic traumatic encephalopathy (CTE), it doesn’t mean that playing in the NFL caused the disease.

Of course, it’s reasonable to think that it might have.

But NFL players are the definition of a non-random sample, extreme in almost every sense of the word.  What if higher levels of testosterone cause CTE?  Or use of PEDs?  Or forced retirement in your mid-30’s?  Or some other trait that many NFLers share?

I don’t know how you do this story without raising that issue.

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Do investment returns decrease…as society becomes wealthier?

William Bernstein – in the Financial Analysts Journal – claims that investment returns decrease as society becomes wealthier.

I stumbled over this.  Why would that be?  

But he makes a compelling case.  When we talk about investment returns from the POV of the user of the capital, we talk about the “cost of capital.”  This is what we have to pay the capital holder in order to use their funds for a while.  For a bond, the cost of capital is fixed ahead of time.  For equities, the return/cost is unknown….but it has no upper limit.

The key here is that we have to persuade someone to part with their capital, which means they can’t buy a second home or a boat or anything else.  In a poor society, it’s hard to persuade someone to give up their capital…since the majority of society is struggling to afford the essentials.

But – as wealth increases – people have more capital to play with.  And they’re more easily persuaded to give it up for a while.  Thus, lower cost of capital.  And lower long-term returns for investors.

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“This error of thinking that things always have a reason that is accessible to us”

Currently reading Antifragile by Nassem Taleb.  He’s surprisingly skeptical of High Science (my term) and — instead — tilts toward the tinkerers.

I’m very inclined to like this book, especially since his skepticism mirrors my own on topics like High Science, government interventionism, and jobs in Corporate America.

But I’m not sure that he’s articulated it in a way that gives you much insight into how to lead your life.  At least not yet.  The biggest insight so far: Optionality matters.  Make decisions that give you good choices in the future.   Limit your downside without limiting your upside.

Which is eerily similar to what they teach you in poker books.

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“Most Depressing Brain Finding Ever”

At Huffpost, Marty Kaplan is — somehow — surprised that prior beliefs influence how we interpret new information, even blinding us to facts.

But then he quickly realizes that this is — of course! — why “Fox News viewers” and “climate change deni[ers]” are incapable of seeing the obvious truths that are in front of them.

One obvious lesson of confirmation bias: It’s always easier to see confirmation bias amongst those who disagree with you!

HT Althouse.

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“We cannot distinguish the sane from the insane…”

My favorite decade is the 1970’s.  Partially because of the urban cowboy shirts.   But also because it was – by subjective evaluation – the most subversive decade.  This is the decade that gave us the original Bad News Bears, remember, one of the most subversive movies ever made.

Now for some subversive science from the 1970’s.  In 1973, D.L. Rosenhan and eight other “normal” people got themselves admitted – undercover – as patients at psychiatric hospitals.  After admission, they made every effort to act normally and to answer questions truthfully, staying on average over 3 weeks.

The doctors and nurses failed to realize that they were sane.  But the real patients in the hospital saw through the ruse.

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